Stocks End Week Higher And Flirt With Resistance
The market rallied last week as investors cheered more easy money from global central banks and waited for next week’s Fed meeting, then the G-20 meeting at the end of the month in Japan. At the end of May the market was oversold and then bounced sharply in early June after the Fed hinted at a possible rate cut in the near future. The market rallied sharply then traded near the 50 DMA line which has served as near-term resistance for some of the major indices. The Nasdaq, Nasdaq 100, and small-cap Russell 2000 are below that important level while the Dow Jones Industrial Average and S&P 500 are trading slightly above it. The 50 DMA line is resistance for the former and has turned into support for the Dow & S&P 500. For now, the action is normal and the key going forward is to see if the 50 DMA line can turn into support for the Nasdaq and Russell. After the big rally, it would be perfectly normal to see the market pause and digest the recent move ahead of the G-20 meeting. If the market races higher, that would be very bullish.
Stocks opened higher on Monday after the U.S. and Mexico reached a deal to avoid new tariffs. Separately, President Trumps said, If China’s President Xi does not attend G-20, more China tariffs will go into effect immediately. That sent stocks slightly lower mid-day. In M&A news, Raytheon and United Technologies agreed to an all-stock merger that would create a new company with $74 billion in annual sales. In other news, Salesforce.com announced it is acquiring big data company Tableau Software on Monday. Salesforce.com will pay $15.3 billion in an all-stock deal, marking the biggest purchase in the company’s history. Tableau’s stock vaulted by nearly 40% on Monday after the deal was announced. Stocks fell on Wednesday as the market continued to struggle near resistance. Billionaire Investor Paul Tudor Jones said he expects the Fed to cut rates and that should help yields, gold and stocks rally.
Thursday & Friday Action:
On Thursday, stocks rallied as the bulls showed up to defend the 50 DMA line. Separately, oil prices jumped after two oil tankers were attacked in the Gulf of Oman. The Trump administration said Iran was behind the attacks. Oil prices jumped one day after oil hit a 5-month low. The recent drop in oil came as supply grew and concern spread that demand will decline.
Market Outlook: Easy Money Is Back
Once again, global central banks showed up and juiced markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and the Federal Reserve reversed its stance and moved back into the easy money camp. Now, other central banks have followed suit and easy money is back to being front and center for the market. As always, keep your losses small and never argue with the tape.